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  • #21
  • Jul 9, 2013 8:46am Jul 9, 2013 8:46am
Quoting OMGtrader
The psychology side is only realized through experience. ....I really believe Psychology of trading should be the first topic that traders need to master before anything else.
I think this summarises the problem. A trader generally learns the psychology through experience (and that requires real money on the line, not a demo account). I am not sure you can learn it in the classroom. Maybe you can learn the principles; but principles are only really 'owned and internalised' when they have been tested.
  • #22
  • Jul 9, 2013 8:52am Jul 9, 2013 8:52am
Quoting hollowhead
{quote} I think this summarises the problem. A trader generally learns the psychology through experience (and that requires real money on the line, not a demo account). I am not sure you can learn it in the classroom. Maybe you can learn the principles; but principles are only really 'owned and internalised' when they have been tested.
It can be understood through teaching but only mastered through experience. There is no other way around it. Demo trading should only be used for one to get a feel of the market, other then that it serves no purpose. You must trade live even if it is on a $500 account. You will never exerpience the emotions of trading on an demo account no matter how successful you think yöu have done.
Trade what you see, not what you think!
  • #23
  • Jul 9, 2013 9:09am Jul 9, 2013 9:09am
Quoting OMGtrader
{quote} It can be understood through teaching but only mastered through experience. There is no other way around it. Demo trading should only be used for one to get a feel of the market, other then that it serves no purpose. You must trade live even if it is on a $500 account. You will never exerpience the emotions of trading on an demo account no matter how successful you think yöu have done.
Theory is just a guideline. It don' t tell how it form the scenario or what would be happening during the progress of one case.

Once trader acquire the experience from either is live or demo trading, then he/she would notice and feel it how should apply those theory in dynamic market. IMO, trading required understanding, and there must be some reason or technique behind to make profitable trade.

It may takes few years to master his/her skill, like those exceptions such as respect Fibonacci golden ratio, after hour movement, and etc. that theory couldn't be taught.
  • #24
  • Jul 9, 2013 11:26am Jul 9, 2013 11:26am
Quoting OMGtrader
{quote} It can be understood through teaching but only mastered through experience. There is no other way around it. Demo trading should only be used for one to get a feel of the market, other then that it serves no purpose. You must trade live even if it is on a $500 account. You will never exerpience the emotions of trading on an demo account no matter how successful you think yöu have done.
Exactly.

You can think you've got a trading method nailed and your killing it on the demo account - then when you start seeing live trades go against you and you start cutting early or moving target points - then doubling up on the next trade to make up for the prior loss... then you really find out how good your trading psychology is.

The real challenge for any retail trader, learning without guidance is that when you start out and you are trading a new method - How do you know if it is a sound method with an edge? Are your losses down to it just being a bad system? Or is it down to your application of the system,

If your system is good - but your application is bad... Why?

2 reasons - Firstly could be that you are unfamiliar with placing market orders, get your position size wrong, place your stops and targets wrong.

These mechanical problems can be ironed out over time.

The second problem is that you are moving your stops, taking profits and playing around with your position size to take revenge on the market.

It is really difficult to identify these problems when you don't have a senior looking over your shoulder asking you 'Why are you doing that stupid mistake? What are you thinking?'

I'm sure most people here have read 'Trading in the Zone'. It took me a few attempts to get through it (as with most trading books I have read) but I think the practical test at the end is an incredibly powerful experience for any new trader.


Homework

Pick a trading system. Any trading system you like - with a few criteria

- The entries, stops and targets must be completely mechanical. No decision making involved.

- Complete 20 trades following the system to the letter. No changing the rules or making any kind of decision making at all.

The test is - Can you correctly execute 20 trades following a specific set of rules without going off course or making mistakes?


Once you can do this - with live cash - then you are ready to move on to the next step which is finding a method with an edge.



Trading really just comes down to finding a method with an edge and applying it over and over again. But if you cant apply a method - regardless of how good the 'edge' is - then you will never be able to do this.

So try this test. Doesn't matter if you make money - it's just a test to see if you can follow a set of rules, 20 times in a row without deviating from the process. It's harder than you might think.
  • #25
  • Jul 9, 2013 11:38am Jul 9, 2013 11:38am
Quoting Redsunfx
TraderLT do you have a short bias because of 5 and 8 MA on the daily ?

My short bias was because of the strong downtrend on the 4h. Also the pivots were lined up as follows: daily below weekly, weekly below monthly. Just shows we've got a strong downtrend and I look to trade price action at levels where we would expect high volume. Floor pivots - day highs/lows - strong areas of horizontal support and resistance.

If you look at today's 30m EURUSD and compare it to my previous post - you'll see price touch the daily pivot - but in a reversal bar, then drop through the floor. Today was a very fast movement. I took 3x risk and covered at yesterday's low. Could have held on and made more but that is trading.....

I don't really want this thread to be about a specific trading method or system for anyone to replicate - but if it helps explain my thoughts around a specific market then I can give a few more examples.
  • #26
  • Jul 9, 2013 11:45am Jul 9, 2013 11:45am
Very interesting thread. I notice people "subscribe" to this thread. How do you do that?
Thanks
Paul
  • #27
  • Jul 9, 2013 11:53am Jul 9, 2013 11:53am
Quoting TraderLT
{quote} My short bias was because of the strong downtrend on the 4h. Also the pivots were lined up as follows: daily below weekly, weekly below monthly. Just shows we've got a strong downtrend and I look to trade price action at levels where we would expect high volume. Floor pivots - day highs/lows - strong areas of horizontal support and resistance. If you look at today's 30m EURUSD and compare it to my previous post - you'll see price touch the daily pivot - but in a reversal bar, then drop through the floor. Today was a very fast movement. I...

To illustrate

Attached Image (click to enlarge)
Click to Enlarge Name: 09.07.2013 EURUSD30m.png Size: 19 KB
  • #28
  • Jul 9, 2013 4:21pm Jul 9, 2013 4:21pm
Quoting OMGtrader
Interesting discussion. The biggest issue most newbie traders ignore is the psychology part of trading. I firmly believe trading is 70% pyschology, 20% risk management, and 10% trading strategy. The risk and trading strategy can be taught. The psychology side is only realized through experience. It is the fundamental reason why many fail at trader. Most start out learning the markets and start developing an system that fits them. I really believe Psychology of trading should be the first topic that traders need to master before anything else. I...
I completely disagree.
You can teach someone how to control his emotions and manage his body impulses in a couple of weeks if you show them a system that works and they see proof of it.
You can design a risk management system for a specific type of trading in an hour and let it written for it to be executed.
You can't show someone to understand fundamentals, market psycology and "read the tape" so easily.

As Larry Williams said in a book i can't remember something like this:"I don't know anybody who has made money without a good trading system and a lot of psychology"
  • #29
  • Edited 4:35pm Jul 9, 2013 4:32pm | Edited 4:35pm
Quoting kerinsp
Very interesting thread. I notice people "subscribe" to this thread. How do you do that? Thanks Paul
Let's not turn this into a support forum for new users; please scroll to the bottom of the page and read the USER GUIDE

Or click over to the Platform Tech section, read the previous FAQ, or even, may I dare suggest it, try the SEARCH function.

It used to be an option in each user's Control Panel (click on your own name to access) that there was a setting to automatically subscribe to any thread that you replied to - therefore, this is why you see many threads with single reply of one word "subscribed"

I can't even find that setting anymore, so not clear if that even works any longer?

What does work is the link at the top of every thread, see the included picture, also shows the PAPERCLIP to find all attachments of any thread you are in.

Apologies to TraderLT for the disruption, I will be quiet from now on; I thoroughly enjoyed your first thread and avidly following this one.

Congratulations, and wishing you every success in your life and career, E.

Attached Image (click to enlarge)
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It takes a lot for me to IGNORE you, but you can try.
  • #30
  • Jul 10, 2013 12:58pm Jul 10, 2013 12:58pm
Quoting Fundaments
{quote} I completely disagree. You can teach someone how to control his emotions and manage his body impulses in a couple of weeks if you show them a system that works and they see proof of it. You can design a risk management system for a specific type of trading in an hour and let it written for it to be executed. You can't show someone to understand fundamentals, market psycology and "read the tape" so easily. As Larry Williams said in a book i can't remember something like this:"I don't know anybody who has made money without a good trading...

Well there lies the issue - In your example, the trader is shown a proven and profitable system.

How many retail hopefuls have access to someone (credible) who can show them a proven and profitable system that they can see working in real time?

There is an open debate as to how important a system is. An average system applied by a good trader will make money, a good system applied by a good trader will make lots of money - however a good system applied by a novice trader will not make money. So on that front I do believe psychology deserves a bit more credit than you give it.

Most retail traders do not have access to a mentor to show them the ropes and how to make money in real time - so they will never really see successful trading in action. That means the psychology has to come from the inefficient method of learning it from books ect.

I'll refer back to the example of the 20 consistent trades following the same system. It's amazing how many systems can be found that will be profitable with consistent application - so why do so many continue to break the rules and process?
  • #31
  • Jul 10, 2013 3:14pm Jul 10, 2013 3:14pm
Your points are valid TraderLT.

I haven't met any other trader than me so my view might be partial.
  • #32
  • Jul 10, 2013 3:35pm Jul 10, 2013 3:35pm
Quoting Fundaments
{quote} I completely disagree. You can teach someone how to control his emotions and manage his body impulses in a couple of weeks if you show them a system that works and they see proof of it. You can design a risk management system for a specific type of trading in an hour and let it written for it to be executed. You can't show someone to understand fundamentals, market psycology and "read the tape" so easily. As Larry Williams said in a book i can't remember something like this:"I don't know anybody who has made...

Markets change, the fundamentals of solid trading psychology don't. There will never be a soundproof, bullet proof system. Eventually it be need to be modified to suit changing market conditions. Psychology makes you understand that you are in the mercy of the markets, and that you will never catch an move entirely. Solid fundamental psychology keeps on the right path of successful trading as it keeps you focused on what really are the important themes of trading.

"I don't know anybody who has made money without a good trading system and a lot of psychology"

-You forget that you need to stop losing money before you can start making money.
Trade what you see, not what you think!
  • #33
  • Jul 10, 2013 11:47pm Jul 10, 2013 11:47pm
Well, Bernanke smashed my system test's P&L last night!

For live trading - here is what I'm looking at for today

Attached Image (click to enlarge)
Click to Enlarge Name: EURUSD M30 11.07.2013.png Size: 31 KB


Since we were so busy last night - I doubt we'd see much volume today. Equity markets will probably be lifted throughout the day, but I wouldn't expect too much going on in the Euro. I'll trade a clean set up with a 1% position, but not much else. I'm seeing clients in the afternoon so unless I see something in the morning, probably no trading for me today
  • #34
  • Jul 11, 2013 1:52am Jul 11, 2013 1:52am
Quoting TraderLT
Well, Bernanke smashed my system test's P&L last night! For live trading - here is what I'm looking at for today {image} Since we were so busy last night - I doubt we'd see much volume today. Equity markets will probably be lifted throughout the day, but I wouldn't expect too much going on in the Euro. I'll trade a clean set up with a 1% position, but not much else. I'm seeing clients in the afternoon so unless I see something in the morning, probably no trading for me today
Are you sure this is a 30M EUR/USD chart?

It's nothing like the one on my screen and I've cross-referenced that against another provider and they match.
Too tired to argue. Too old to care.
  • #35
  • Jul 11, 2013 4:38am Jul 11, 2013 4:38am
Quoting davidb
{quote} Are you sure this is a 30M EUR/USD chart? It's nothing like the one on my screen and I've cross-referenced that against another provider and they match.
It looks like the EUR/USD on a four hour chart.
  • #36
  • Jul 11, 2013 4:54am Jul 11, 2013 4:54am
OMGtrader ....... Ref post #32 ....... Well said & spot on my friend.
  • #37
  • Jul 13, 2013 12:46am Jul 13, 2013 12:46am
Quoting TraderLT
{quote} To illustrate {image}
Its better if we can see your entry/exit and or TP and SL in the chart....
Just joined and reading all your posts...
I am surprised to see how so many people came here (this thread) on the same day, i.e. July 9 !
  • #38
  • Jul 13, 2013 7:34am Jul 13, 2013 7:34am
Good afternoon everyone -

I've just been enjoying the weather in the UK. It's rare that we get some summer sun - so taking full advantage atm!

Anyway, I'm going to crack on with my next discussion point which was Trading Systems.


I'm going to define a trading system as "A set of rules that determine when to enter a trade, the entry price, the stop loss, the take profit and the position size with no discretion".

I personally believe that using a clearly defined trading system is the best way to become consistent and profitable. Although it will not make you rich - at least not without a large starting account balance.

George Soros has said that "Mechanical trend following systems can be profitable but with lots of volatility and a low Sharpe ratio.

You will not find a system out there - or stumble upon one by accident that will generate huge returns with low drawdowns. I do believe they exist - but the programming that goes in to calculating the position sizing (which is the key to mechanical systems) is incredible.

Despite the volatility and low win %age, I like using trend following systems as an example of how easy trading can be.

Pick a mechanical system somewhere on this site - Open a new demo account - take 20 trades following the system to the letter and see how profitable they turn out.

Now I don't have any relationship with the following threads, I'm not advertising for them - I'm just using them as an example.

100pipsaday's systems are a good example of mechanical systems with no discretion. Although I don't know if they are profitable in the long term - they are easy to follow, demo and play around with. Perfect for people just starting out with getting used to working with a mechanical system

(http://www.forexfactory.com/100pipsaday)


The advantages here are that the system rules are set in stone for you to follow.

In time and once the new trader gets used to following rules with no deviation - you should graduate on to building a system with an edge that fits your style of trading.

How do you know what your style of trading is? I think this comes from time in front of the markets.

My personal style is that I like support and resistance - I like trading the daily chart and the 30min chart - I like trading breakouts of support/resistance then getting in on a trade following a retest.

Things I dont like - Any chart below 15m. Moving averages (in general). Trading counter trend. Oscillators. Diagonal trend lines.

I'm not saying that these things are wrong - but for the way I trade, I can't see the value in the above mentioned trading approaches. I know people who use those tools and are profitable so it's important to recognize that there is no right or wrong way to trade - you just need to build a system with an edge that fits your style.

I can't give you tests to find out what your style is - because I think that is a personal experience thing. Maybe I'm missing something and I'd welcome anyone to suggest ways of finding out what trading style fits with an individual trader
  • #39
  • Jul 13, 2013 7:48am Jul 13, 2013 7:48am
I think it was Donald Trump who said "there's no shortcuts to anywhere worth going"

I think that you only have to set yourself in the direction you want to go and veer off your path for no one. How long will that journey take?

Well that will depend on yourself and your own set of circumstances, if you focus on your goal then hopefully your barometers and thermometers and dajarometers will point you to the right star no matter what weather you encounter.

If you could go back 5 years from now would you have done anything differently? Hindsight 20/20... Sure you probably would have liked to, but if you went back 5 years from now I would argue that you would do everything exactly the same because your life prior to that time had lead you up to a certain point, dredged with certain baggage, bounded by a certain situation to make you choose the inevitable path that you did.

I think my post makes some sort of case for destiny, but destiny therefore lyes with desire... Stop looking around fro shortcuts and just let your faith guide you on the path you so desire. Shortcuts are therefore interior.. The hard way is easiest in the long run// etc etc...
Time hides Nothing
  • #40
  • Jul 20, 2013 8:01am Jul 20, 2013 8:01am
Sorry to go against "generally accepted" glorification of psychology in trading success, but I don't think it matters that much. otherwise the likes of goldman sachs would be hiring but psy's as traders, whereas the psy gurus themselves admit not trading. To me psychology, system and management bear the same importance. If you don't know how to trade, or to do anything else for that matter, I fail to understand how psychology will help you out. Can you enter a car for the first time and drive without any PRACTICAL lessons, just because you are well psyched up? All you need when starting out is competent guidance and practice
Patience is magic
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